Economic springtime? We're not in the clover yet

Economists were heartened by some recent reports that show the economy moving in a positive direction, but it's too early to say if these "green shoots" of recovery, to use Federal Reserve Board chair Ben Bernanke's phrase, are here to stay or will be nipped in the bud by a future market chill.

First, the good news: new jobless claims dropped to 601,000, a smaller number than analysts anticipated. Consumer confidence rose significantly, according to The Conference Board, and retail sales rose by 2.1% in April. All of these are good news, to be sure. But hold onto your wallet, because we're not necessarily out of the woods just yet.

It's not all sunshine and daisies out there, and two or three snippets of good news do not a recovery make, says Aparna Mathur, a research fellow at the American Enterprise Institute for Public Policy Research. "It's too soon to use this data to infer that there's an economic recovery that's going to come in the next few months," she says, pointing out that the housing market (where, if you recall, this whole mess started) is still abysmal, and future unemployment numbers could easily spike again if a huge, interconnected company like Chrysler or General Motors halts production.
While the drop in new jobless claims is encouraging, there are still a record-high number of Americans currently drawing unemployment. Plus, that 601,000 is still nearly double the 327,000 people who filed new unemployment claims for the same time period last year.

As for the retail sector, analysts say most of the boost was due to the Behemoth of Bentonville, Wal-Mart. Wal-Mart's image as a low-price leader seems tailor-made for a recession era, but it's one of the only beneficiaries of these tight-fisted times. Case in point: If you take Wal-Mart out of the equation, retail sales actually dropped by 2.7% for the month. Mid-priced retailers like Kohl's and J.C. Penney saw sales drop by around 6% in April; higher-end stores like Neiman Marcus and Saks registered steeper declines (22.5% and 32%, respectively).

The AEI's Aparna Mathur says only when labor, spending and housing numbers all turn positive and stay that way for five to six months will it be safe to declare that a recovery is taking place. In other words, April might turn out to be the cruelest month after all, if these positive numbers can't gain traction in the months ahead.
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